Homebuilder Outlook Plunges, Reversing Spring Rebound

In a stark reversal during the heart of the spring housing market, confidence among the nation’s homebuilders dropped in April to levels not seen since January.

Home Construction
Home Construction

An association index measuring sentiment fell three points, changing course after seven straight months of gains.

It now stands at twenty-five; fifty is the line between positive and negative sentiment.

“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said National Association of Home Builders Chief Economist David Crowe in a release.

“This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery—particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals,” the release goes on to say.

The three components of the index each posted a decline, both current sales and sales expectations down three points and buyer traffic down four points from March.

Sentiment had been running high, as warm weather and an improving economy brought more buyers out to look at new construction.Stocks of the nation’s big public home buildershave also been on a tear, some values up over 50 percent since last summer in anticipation of a big Spring.

“While builder and investor enthusiasm continue to surge, U.S. housing metrics are failing to keep pace,” according to a report from Fitch Ratings last week, in a prescient reading of the market. “Home prices are likely to remain soft if employment growth trends continue to be volatile,” adds Fitch’s Robert Curran.

Single-family housing starts and home sales fell below expectations in February, and home prices, while easing in their declines, are still falling according to several industry indices.

Expectations are for gains in March housing starts and a slight drop in building permits driven largely by multifamily. Those numbers are released from the U.S. Commerce Department at 8:30am ET Tuesday.

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